Exam 14: Firms in Competitive Markets

Scenario 14-3 As part of an estate settlement Mary received $1 million.She decided to use the money to purchase a small business in Anywhere,USA.Her business operates in a perfectly competitive industry.If Mary would have invested the $1 million in a risk-free bond fund she could have made $100,000 each year.She also quit her job with Lucky.Com Inc.to devote all of her time to her new business;her salary at Lucky.Com Inc.was $75,000 per year. -Refer to Scenario 14-3.What are Mary's opportunity costs of operating her new business?

A profit-maximizing firm will shut down in the short run when

Figure 14-1 -Refer to Figure 14-1.Which of the four prices corresponds to a perfectly competitive firm earning positive economic profits in the short run?

A firm operating in a perfectly competitive industry will continue to operate if it earns zero economic profits because it is likely to be earning positive accounting profits.

A certain competitive firm sells its output for $20 per unit.The 50th unit of output that the firm produces has a marginal cost of $22.Which of following is not necessarily true?

At the profit-maximizing level of output,

Figure 14-8 In the figure below,panel (a)depicts the linear marginal cost of a firm in a competitive market,and panel (b)depicts the linear market supply curve for a market with a fixed number of identical firms. -Refer to Figure 14-8.If there are 200 identical firms in this market,what level of output will be supplied to the market when price is $1.00?

Which of these types of costs can be ignored when an individual or a firm is making decisions?

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue,then

At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10.At the market price of $12.50 per unit,the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units.What is the firm's current profit? What is likely to occur in this market and why?

In the short run,there are 500 identical firms in a competitive market.The firms do not use any resources that are available in limited quantities,and each of them has the following cost structure: The long-run supply curve for this market is

Table 14-2 -Refer to Table 14-2.Over what range of output is marginal revenue declining?

When determining whether to shut down in the short run,a competitive firm should

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price rises to $25,and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price.Once the firm has adjusted,which of the following statements is correct?

A corporation has been steadily losing money on one of its product lines,Wally's Widgets.The firm produces Wally's Widgets in a factory that cost $20 million to build 10 years ago.The firm is now considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not to sell is correct?

Regardless of the cost structure of firms in a competitive market,in the long run

A market is competitive if

Assume a firm is producing 800 units of output,and it sells each unit for $6.Its average total cost is $4.Its profit is

Table 14-3 The following table presents cost and revenue information for Soper's Port Vineyard. -Refer to Table 14-3.What is the marginal revenue from selling the 3rd unit?

A firm that shuts down temporarily has to pay